- Attacks by Yemen’s Houthi militia have made the Red Sea, a vital maritime route via the Suez Canal, hazardous for cargo ships since November.
- Alternative Route: As a result of this, ships are now taking the lengthier Cape of Good Hope route, hurting global trade and increasing expenses.
About
| Details | |
| Location | Between Africa (Egypt, Sudan, Eritrea, Djibouti) and Asia (Saudi Arabia, Yemen). |
| Connection | The Bab el Mandeb strait and the Gulf of Aden connect it to the Indian Ocean. |
| Length | Approximately 2,250 km long. |
| Width | The width varies from 355 km at its broadest point to 20 km at the Tiran Strait. |
| Maximum Depth | About 7,254 feet (2,211 m) in the central median trench. |
| Unique Features | One of the saltiest bodies of water on the planet. Notable for its diverse environment, which includes huge coral reefs. |
| Climate | The neighbouring desert and high evaporation rates contribute to its extreme salinity. |
| Economic Importance | Major shipping route; oil-rich region with substantial petroleum resources on the sea’s borders. |
Impact on Indian Trade
- Shipping Routes Change: As a result of the attacks, over 90% of India’s western hemisphere freight is being redirected through the Cape of Good Hope.
- Contractual Implications: Depending on the type of buyer-seller contract, the impact varies, with certain consignments being held up due to increasing freight expenses.
- Freight Cost Increase: Freight costs have increased dramatically, up to sixfold in some circumstances, affecting all consignments, particularly low-value, high-volume cargo and perishables.
What this means for India’s imports
- Increased Import Prices: The lengthier transit time and crises may result in higher import costs and a need for better inventory management.
- Impact on Fuel costs: Given India’s reliance on crude oil and petroleum product imports, the crisis may have an impact on initiatives to cut fuel costs.
- Tanker Market Dynamics: Despite increasing freight prices on affected routes, tanker rerouting has not been widespread.
Global and Indian Reaction
- The UN and the US have condemned the Houthi attacks, and the US is requesting additional cooperation for ‘Operation Prosperity Guardian’ to secure safe sea lanes.
- Monitoring in India: The Indian government is keeping a careful eye on the situation, with the Commerce Secretary addressing potential consequences with officials and trade organisations.
Sector-Specific Impact
- Commodities Most Affected by Sector-Specific Impact: Chemicals, polymers, and petrochemicals are particularly hard hit due to their inability to absorb freight increases.
- High-Value Goods Alternatives: Airlifting is an alternative for high-value, low-volume commodities, however most affected goods are huge in volume.
Source: https://m.economictimes.com/news/economy/foreign-trade/red-sea-crisis-impacts-indias-exports-on-higher-shipping-insurance-costs/articleshow/106581816.cms